Although space may represent the final frontier for man, the realm of cyberspace embodies an equally untamed wilderness. With more similarities to the Wild West than to a civilized modern society, (1) the Internet defies previously established principles of law and order, shunning the constructs of reality in favor of a virtual existence where there are few recognized legal conventions. Since the Supreme Court's decision in Sony Corp. of America v. Universal City Studios Inc., (2) copyright holders and developers of emerging technology alike have struggled with the laws regarding the liability of distributors whose products are used by third parties for the purposes of copyright infringement. (3) The continuing creation and distribution of new software through the use of the Internet, however, has led the courts deeper into a legal quagmire. Gone are the days of Betamax (4) and cassette tapes; high-quality pirated music and video are now available for free download through online services. In the face of this emerging technology, courts and legal scholars are actively debating the merits of holding liable the distributors of products that enable the infringement of copyrights. (5)
Last Term, in Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., (6) the Supreme Court held that "one who distributes a device with the object of promoting its use to infringe copyrights, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting [third-party] acts of [copyright] infringement." (7) Despite the Court's attempt to develop new rules for a digital age, the numerous opinions by the Justices in Grokster left a murky standard with little application outside the particular facts of that case. Presenting a unanimous opinion solely on the facts of the case, the Justices then splintered on the application of the law, set forth a vague holding without practical tools to combat the larger epidemic of online piracy, while simultaneously presenting conflicting applications of the previous standard for distributor liability under Sony. The Court's attempt to resolve the issue of copyright infringement runs the risk of overstepping the judicial branch's power by regulating a legislative policy matter better left to the discretion of Congress.
In the fall of 2000, Metro-Goldwyn-Mayer Studios (MGM) filed suit against two distributors of free online software, Grokster and Streamcast Networks, alleging that the defendants knowingly and intentionally circulated their software in order to enable users to reproduce and distribute copyrighted works in violation of the Copyright Act. (8) Moreover, MGM maintained that the software provided by the two companies served no substantial noninfringing purpose. (9) The software allowed computer users, through the use of peer-to-peer networks, (10) to connect with other members and download both copyrighted and noncopyrighted music and video. In its lawsuit, MGM sought damages arising from the copyright infringement carried out by users and an injunction to prevent the continued distribution of the software. (11)
Several facts presented in the case were undisputed by either party. First, users on the network were downloading copyrighted music and video files that were made available by the software. (12) Second, users downloading the copyrighted music and video were engaged in illegal activities in violation of the Copyright Act. (13) Respondents argued that, under the doctrine adopted by the Court in Sony, the product was "capable of substantial noninfringing use" and that therefore they could not be held liable for the actions of their users. (14)
The case was originally brought before the federal District Court for the Central District of California, which granted summary judgment in favor of Grokster and StreamCast as to liability arising from the distribution of their software. (15) The court predicated its decision on the distributors' lack of actual knowledge about specific acts of infringement and the product's capability of substantial legitimate uses. …